German Cigar Makers Warn Tax Plan Could Raise Prices 60 Percent

German cigar and cigarillo producers are warning that a tax proposal under discussion in the Bundestag could push retail prices up by 50 to 60 percent starting in January, a change they say would deal a severe blow to an already struggling industry.

Bodo Mehrlein, managing director of the Federal Association of the Cigar Industry, said the plan by the governing coalition's parliamentary groups would amount to a sharp tax increase if implemented as currently proposed. He raised the issue at the Intertabac trade fair in Dortmund, a major gathering for the tobacco industry.

"It would be a tax explosion, which would drive prices up by 50 to 60 percent," Mehrlein said.

To illustrate the potential impact, he pointed to a hypothetical cigar currently priced at 10 euros. Under the proposed changes, he said, that same product could cost around 16 euros, a jump he argued would be steep enough to push many buyers away from purchasing at all.

Mehrlein said such a shift would hit the sector at a particularly difficult moment, since demand has already been softening this year. He said revenue for the German cigar industry is expected to come in six to seven percent lower in 2024 compared with the previous year, a decline he linked to the broader economic climate.

He said rising fuel prices and other increases in everyday costs have made consumers more price conscious across the board, and that discretionary purchases such as cigarillos or cigars are often among the first items cut from household budgets when money is tight.

According to figures from the association, Germany is home to seven companies that manufacture cigars, four of them based in Bünde and one in the Minden-Lübbecke district, both in North Rhine-Westphalia. Beyond domestic manufacturers, another 15 companies import cigars and cigarillos from abroad for sale within Germany.

The association said the industry as a whole employs about 1,640 people in the country. Most of the tobacco used in cigars and cigarillos produced domestically is sourced from Latin America and Indonesia, according to the association's figures.

Roughly two billion cigars and cigarillos are sold in Germany each year, the association said. Under current tax law, the two product categories are treated identically, meaning cigarillos and cigars fall under the same tax classification regardless of size or price point.

Mehrlein said that if the coalition does not significantly scale back its proposal, the consequences for manufacturers could be serious. "Should the coalition not substantially soften its plan, it would hit us hard: job losses would likely be unavoidable," he said.

He pushed back against any characterization of the industry's products as purely luxury items, noting that the sector serves a wide range of customers beyond high-end buyers. "We don't just stand for the high-end cigar priced at more than 100 euros, but also for good mid-range products," he said. "Our customers aren't only wealthy people, but also the ordinary man who likes to smoke his cigarillo in his allotment garden."

Mehrlein also expressed concern for the roughly 500 specialty retail shops across Germany that sell cigars and cigarillos, warning that a steep price increase could threaten their business as well. "At some point a tipping point is reached on price: the goods become so expensive that demand collapses rapidly and our entire industry gets dragged down with it," he said.

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